Statistics Canada said the economy faced sharp job losses in February in a report that suggests the labour market is struggling after nearly a year of U.S. tariff pressures.
"This was a very bad report on almost every single measure," CIBC senior economist Katherine Judge said.
In its monthly labour force survey, Statistics Canada said Friday that employers collectively shed 84,000 positions in February, driving the unemployment rate up two-tenths of a point to 6.7 per cent.
February saw more than 100,000 jobs lost in full-time work, while private sector employment fell by 73,000 positions.
A Reuters poll of economists heading into the report Friday expected a slight rise in the unemployment rate, but also called for a gain of 10,000 jobs last month.
Despite a flurry of hiring in late 2025, back-to-back months of job losses to start 2026 mean the economy has added just 80,000 positions over the past six months.
Statistics Canada said that, compared to the same month a year ago, total employment was little changed in February.
Judge said measures of employment based on payroll data — which are less timely but somewhat less volatile than the monthly labour force survey — have been showing weakness in the labour market for a while.
"I would say that you have seen the resilience fade," she said.
Speaking to reporters during a media availability in Norway on Friday, Prime Minister Mark Carney pinned the blame for the recent spate of job losses on Canada's fractious trade relationship with the United States.
“Given the scale of the trade actions, the uncertainty that is associated with the trade actions in the United States, that is causing big adjustments in the economy," Carney said.
Alberta MP Garnett Genuis, employment critic for the federal Conservatives, said Carney's policies were failing to improve job prospects for Canadians as the prime minister nears a year in the office. In a media statement, he highlighted a rebound in the youth unemployment rate to above 14 per cent last month as cause for concern.
Workers aged 15 to 24 faced a loss of 47,000 jobs last month, Statistics Canada said, while men between the ages of 25 and 54 also faced steep job losses in February.
"As employment continues to fall, Liberals have ignored our proposals and failed to put forward any solutions to their jobs crisis," Genuis said.
Judge said that while average hourly wage gains accelerated to 3.9 per cent annually in February, some of that is because the calculation now includes a smaller share of young workers, who are typically paid less.
The wholesale and retail trade sector led job losses last month, with other industries in the services side of the economy also contracting. Goods-producing industries like construction and manufacturing shed positions, while the transportation and warehousing industry and public administration reported gains.
Judge said labour market weakness had been largely contained to sectors like manufacturing that are most exposed to U.S. tariffs. But with only three sectors reporting job gains last month, she said those cracks are spreading.
"This is very worrisome for the Bank of Canada," she said.
The central bank is set for an interest rate decision on Wednesday after holding its key rate at 2.25 per cent in January. Monetary policymakers will get a look at inflation data for February on Monday before making the call.
TD Bank senior economist Andrew Hencic said in a note to clients Friday that the shrinking labour force, a rising unemployment rate and steep job losses make the latest employment data a "decidedly weak report."
Hencic said the economy is struggling to gain traction in the face of structural changes, such as ongoing trade uncertainty.
He also flagged that the war in the Middle East is a "wild card" for the economy in terms of how long the conflict will last. An extended disruption will mean a prolonged bout of inflation tied to higher energy costs, which Hencic said will have knock-on effects for consumer spending and growth more broadly.
Judge said that, from the Bank of Canada's perspective, the labour market softness in February should offset inflationary pressures from the recent oil spike.
She said CIBC's call is still for the central bank to keep rates on hold for the rest of the year, though weakness in data like the report Friday tilt risks toward a further cut.
Financial market odds for the rate decision next week are 90 per cent in favour of a hold, slightly reduced from before the jobs report, according to LSEG Data & Analytics.
Statistics Canada reported that Quebec lost 57,000 jobs in February, which the agency called the first significant loss of employment in the province in over four years. The jobless rate in the province rose 0.7 percentage points to 5.9 per cent last month.
British Columbia, meanwhile, shed 20,000 positions, and Saskatchewan and Manitoba also lost jobs.
Picture Courtesy: THE CANADIAN PRESS/Christinne Muschi
